Weekly Economic & Market Update 12/14/2015

Week in Review

Global equity markets dropped considerably on continued fears of a global economic slowdown that is being reinforced by the ongoing weakness in energy prices. Certainly, the continuation of oil production levels within OPEC has not helped the downward slope of energy prices. Top of mind as well is the drop-off in demand for oil on a global basis. While lower energy prices are welcomed by consumers at the pump, the concern around significantly lower energy prices is in job losses in the energy sector as well as financial stress on many energy companies.

Credit markets (reads as bond markets) were dealt a rare surprise when a major mutual fund company, Third Avenue Management, announced that they would be placing redemption restrictions on one of their junk bond funds and closing it. Lighthouse does not have positions in the fund mentioned in article. The reasons Third Avenue cited were investor redemption demands outpacing the ability of the fund to raise cash without resorting to selling at prices unfair to remaining shareholders. Third Avenue also noted the general reduction of liquidity in the fixed income markets as a source of problems for the fund. While the example of the fund problems noted above only directly impact the investors of that fund, it is an item to note. Stress in the bond markets is noteworthy as bond markets worldwide are larger than equity markets and are the grease for the stock market to run efficiently.

Getting Technical with Market Charts

In this section we present charts of the S&P 500 Stock Index and the US Bond Market Index relative to their 50 day (blue line) and 200 day (red line) moving averages. In addition, we have added the blue shaded area which represents the recent trading channel. The 50 and 200 day moving averages are widely followed market trend indicators that provide a general picture of the health of the broad indexes.

Chart 1 – S&P 500

SPX 12.14.15

Chart 2 – Aggregate Bonds

AKG 12.14.15

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Disclaimer – Information contained herein is taken from sources believed to be reliable, but cannot be guaranteed as to its accuracy. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. The Standard and Poors 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Contact your investment professional to discuss suitability for your particular circumstances. This article does not constitute an offer of sales of any securities. Securities trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Lighthouse Financial Advisors, Inc., dba Lighthouse Wealth Management, is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.